A123 Systems Files For Chapter 11, Will Be Acquired By Johnson Controls

A123 Systems Files For Chapter 11, Will Be Acquired By Johnson Controls

Johnson Controls will provide $72.5 million in DIP financing to support A123's continued operations.

WALTHAM, Mass. – A123 Systems Inc., a developer of advanced Nanophosphate lithium iron phosphate batteries and systems founded in 2001, has entered into an asset purchase agreement with Johnson Controls, in a transaction valued at $125 million.
 
Under the terms of the agreement, Johnson Controls plans will acquire A123’s automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, Mich.; its cathode powder manufacturing facilities in China, and A123’s equity interest in Shanghai Advanced Traction Battery Systems Co., A123’s joint venture with Shanghai Automotive. The asset purchase agreement also includes provisions through which Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses.                                 
 
To facilitate the transaction process, A123 and all of its U.S. subsidiaries yesterday filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The company’s subsidiaries located outside the U.S. were not included in the filings.
 
In conjunction with the proposed transaction, A123 has received a commitment from Johnson Controls for $72.5 million in “debtor in possession” (DIP) financing to support the company’s continued operations during the pendency of the sale process. If approved by the court, the DIP financing will be used to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.
 
"We believe the asset purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time,” said David Vieau, CEO of A123. “We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion. Since disclosing the Wanxiang agreement, we have simultaneously been evaluating contingencies, and we are pleased that Johnson Controls recognizes the inherent value of our automotive technology and automotive business assets. We are also pleased that we have received indications of interest that recognize the value of our grid and commercial businesses. We are encouraged by the significant interest we have received, as multiple parties have submitted proposals for these businesses. As we move through this transaction process, we expect to continue operating and working with customers and suppliers.”
 
“Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry,” said Alex Molinaroli, president, Johnson Controls Power Solutions. “Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of powertrains and associated energy storage solutions. We believe that A123’s automotive capabilities are a good complement to our existing portfolio and will further advance Johnson Controls’ position as a market leader in this industry.”

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